The most significant development in managed care today is the transfer of insurance risk from health plans to primary care group practies of all sizes, specialty groups (such as groups of psychologists), and even individual physicians. it is this devolution of risk from the managed care organization (MCO) to lower levels of the provider structure that is the primary focus of my work. The proposed study would include three complementary analyses. First, a cross-sectional study of the impact of risk-sharing on utilization and outcomes within a managed behavioral health care organization will be conducted. This study takes advantage of variationwith a single MCO in the structure of contracting and incentives that individual behavioral health providers face. The availability of data on diagnosis, severity, and treatment process and outcomes provide a unique opportunity to evaluate the impact of provider risk-bearing on the treatment process and outcomes provide a unique opportunity to evaluate the impact of provider risk-bearing on the treatment and subsequent health status of patients in a behavioral health setting. A second empirical analysis using data from the same MCO willb e conducted to address the question of how the degree of risk-sharing across primary care groups practies and IPAs relates to organizational design of the groups and group-level outcomes such as average hopital admissionrates. In addition, I will consider whether there is complementarity between certain governance structures and the use of financial incentives by the group practice. Finally, because of a unique opportunity to observe the range of contracts taht a group serves, I willbe able to fully characterize the incentives to the group. Thus, I will be able to address the question of whether and how provider groups treat different health plans' patients differently when they face multiple incentives (multiple plan contracts). The third paper will attempt to answer the fundamental question underlying the empirical work: what economic rational can be givenfor the types of downstream risk-sharing contracts we observe between health plans and clinicans? A critical compoent of my answer to this question is my choice of the specificationof provider risk aversion and the considerationof moral hazard for different types of choices the clinician can make on behalf of the covered population. In addition, the influence of competition inboth the provider and health plan markets onchoice of reimbursement scheme will be explored.